Women exclusively manage just 2% of the $12.6 trillion held in US mutual funds.

Women are under-represented among mutual fund managers, a new study found, in a gender imbalance that poses challenges for an industry looking to run more money from female clients.

Among 7,410 portfolio managers of U.S. open-end mutual funds, only 9 percent were women, the study released this month by researchers from Morningstar Inc of Chicago, and widely discussed at the research firm’s investor conference this week, found. It also found that women exclusively managed only about 2 percent of the $12.6 trillion held in those funds.

That’s a lower level of representation compared to other professional fields, the study’s authors found, even as the women held their own in terms of fund performance. Twenty percent of law firm partners are women, for instance, and 19 percent of partners in U.S. accounting firms are women.

The figures are in sync in with other studies showing women holding relatively few positions of power in finance.

Attendees at this year’s Morningstar Investment Conference said the findings were noteworthy because clients now expect to have more women overseeing their money.

“As a portfolio manager, I get a very good reception from people out there,” said Dawn Mangerson, co-manager of the McDonnell Intermediate Municipal Bond fund. It is co-managed with Jim Grabovac, a lineup Mangerson said goes over well. “If there are both men and women (involved) it’s looked at favorably.”

Clients also have more fund managers to choose from in general, and so can be more discerning about qualities they like in a manager, said Mary Jane McQuillen, a portfolio manager for Legg Mason Inc’s ClearBridge Investments unit.

The Morningstar study found firms with the highest percentage of women fund managers included Dodge & Cox, where 6 of 24 fund managers were women, and Franklin Templeton Investments, where 19 of 129 fund managers were women.

In a keynote speech at the conference, Sallie Krawcheck, a former wealth-management executive, said that while women control $11 trillion in wealth, many are unhappy with their financial adviser.

Firms could do more to include women among their leadership, Krawcheck said, and she questioned an idea outlined in the bestselling book by Facebook executive Sheryl Sandberg, “Lean In,” which suggested women push harder to get ahead.

That’s an easy message for companies to adopt rather than changing their own cultures, Krawcheck said.

Taken to an extreme, Krawcheck said, “Lean In is shorthand for: ‘you women should really do something about this’.”

Eighty-five percent of stock-pickers at large-cap funds are trailing their benchmark indexes — likely their worst performance in three decades.

Stock-picking fund managers are testing their investors’ patience with some of the worst investment returns in decades.

With bad bets on financial shares, missed opportunities in technology stocks and too much cash on the sidelines, roughly 85% of active large-cap stock funds have lagged their benchmark indexes through Nov. 25 this year, according to an analysis by Lipper, a Thomson Reuters research unit. It is likely their worst comparative showing in 30 years, Lipper said.

Some long-term advocates of active management may be turned off by the results, especially considering the funds’ higher fees. Through Oct. 31, index stock funds and exchange traded funds have pulled in $206.2 billion in net deposits.

Actively managed funds, a much larger universe, took in a much smaller $35.6 billion, sharply down from the $162 billion taken in during 2013, their first year of net inflows since 2007.

Jeff Tjornehoj, head of Lipper Americas Research, said investors will have to decide if they have the stomach to stick with active funds in hopes of better results in the future.

“A year like this sorts out what kind of investor you are,” he said.

Even long-time standout managers like Bill Nygren of the $17.8 billion Oakmark Fund and Jason Subotky of the $14.2 billion Yacktman Fund are lagging, at a time when advisers are growing more focused on fees.

The Oakmark fund, which is up 11.8% this year through Nov. 25, charges 0.95% of assets in annual fees, compared with 0.09% for the SPDR S&P 500 exchange traded fund, which mimics the S&P 500 and is up almost 14% this year, according to Morningstar. The Yacktman fund is up 10.2% over the same period and charges 0.74% of assets in annual fees.

The pay-for-active-performance camp argues that talented managers are worth paying for and will beat the market over investment cycles.

Rob Brown, chief investment strategist for United Capital, which has $11 billion under management and keeps about two thirds of its mutual fund holdings in active funds, estimates that good managers can add an extra 1% to returns over time compared with an index-only strategy.

Indeed, the top active managers have delivered. For example, $10,000 invested in the Yacktman Fund on Nov. 23, 2004, would have been worth $27,844 on Nov. 25 of this year; the same amount invested in the S&P 500 would be worth $21,649, according to Lipper.

Even so, active funds as a group tend to lag broad market indexes, though this year’s underperformance is extreme. In the rout of 2008, when the S&P 500 fell 38%, more than half of the active large cap stock funds had declines that were greater than those of their benchmarks, Lipper found. The last time when more than half of active large cap stock managers beat their index was 2009, when the S&P 500 was up 26%. That year, 55% of these managers beat their benchmarks.

Unusually Bad Bets

In 2014, some recurring bad market bets were made by various active managers. Holding too much cash was one.

Yacktman’s Subotky said high stock prices made him skeptical of buying new shares, leaving him with 17% of the fund’s holdings in cash while share prices have continued to rise. He cautioned investors to have patience.

“Our goal is never to capture every last drop of a roaring bull market,” Subotky said

Oakmark’s Nygren cited his light weighting of hot Apple shares and heavy holdings of underperforming financials, but said his record should be judged over time. “Very short-term performance comparisons, good or bad, may bear little resemblance to long term results,” he said.

Shares of Apple, the world’s most valuable publicly traded company, are up 48% year to date. As of Sept. 30, Apple stock made up 1.75% of Oakmark’s assets, compared with 3.69% of the SPDR S&P 500 ETF.

“We have been very much believers in active management, but a number of our active managers have let us down this year, and we are rethinking our strategy,” said Martin Hopkins, president of an investment management firm in Annapolis, Md. that has $4 million in the Yacktman Fund.

Derek Holman of EP Wealth Advisors, in Torrance, Calif., which manages about $1.8 billion, said his firm recently moved $130 million from a pair of active large cap funds into ETFs, saying it would save clients about $650,000 in fees per year.

Holman said his firm still uses active funds for areas like small-cap investing, but it is getting harder for fund managers to gain special insights about large companies.

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Mutual fund companies are trying to juice returns of target-date funds by giving their managers more leeway to make tactical bets on stock and bond markets, even though this could increase the volatility and risk of the widely held retirement funds.

It’s an important shift for the $651 billion sector known for its set-it-and-forget-it approach to investing. Target-date funds typically adjust their mix of holdings to become more conservative over time, according to fixed schedules known as “glide paths.”

The funds take their names from the year in which participating investors plan to retire, and they are often used as a default investment choice by employees who are automatically enrolled in their company 401(k) plans. Their assets have grown exponentially.

The funds’ goal is to reduce the risk investors take when they keep too much of their money in more volatile investments as they approach retirement, or when they follow their worst buy-high, sell-low instincts and trade too often in retirement accounts.

So a move by firms like BlackRock Inc., Fidelity Investments and others to let fund managers add their own judgment to pre-set glide paths is significant. The risk is that their bets could blow up and work against the long-term strategy—hurting workers who think their retirement accounts are locked into safe and automatic plans.

Fund sponsors say they aren’t putting core strategies in danger—many only allow a shift in the asset allocation of 5% in one direction or another—and say they actually can reduce risk by freeing managers to make obvious calls.

“Having a little leeway to adjust gives you more tools,” said Daniel Oldroyd, portfolio manager for JPMorgan Chase & Co’s SmartRetirement funds, which have had tactical management since they were introduced in 2006.

GROWING TACTICAL APPROACH

BlackRock last month introduced new target-date options, called Lifepath Dynamic, that allow managers to tinker with the glide path-led portfolios every six months based on market conditions.

Last summer, market leader Fidelity gave managers of its Pyramis Lifecycle strategies—used in the largest 401(k) plans—a similar ability to tweak the mix of assets they hold.

Now it is mulling making the same move in its more broadly held Fidelity target-fund series, said Bruce Herring, chief investment officer of Fidelity’s Global Asset Allocation division.

Legg Mason Inc says it will start selling target-date portfolios for 401(k) accounts within a few months whose allocations can be shifted by roughly a percentage point in a typical month.

EARLY BETS PAYING OFF

So far, some of the early tactical target-date plays have paid off. Those funds that gave their managers latitude on average beat 61% of their peers over five years, according to a recent study by Morningstar analyst Janet Yang. Over the same five years, funds that held their managers to strict glide paths underperformed.

But the newness of the funds means they have not been tested fully by a market downturn.

“So far it’s worked, but we don’t have a full market cycle,” Yang cautioned.

The idea of putting human judgment into target-date funds raises issues similar to the long-running debate over whether active fund managers can consistently outperform passive index products, said Brooks Herman, head of research at BrightScope, based in San Diego, which tracks retirement assets.

“It’s great if you get it right, it stings when you don’t. And, it’s really hard to get it right year after year after year,” he said.

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Apple APPLE INC.AAPL-0.67% — which has been criticized in the past for greenhouse gas emissions, the use of toxic materials in its products, and working with suppliers who hire underage workers — has adopted a slew of new green policies recently and now earns better marks from groups such as Greenpeace.

For managers of environmentally aware mutual funds, the recent improvements bolster the appeal of a company whose shares are considered green in another way — by making money.

While the iPhone maker’s stock is up more than 15% this year, Apple shares are still considered attractively priced, given the company’s massive earnings. This, plus improving environmental performance make Apple “the one stock you just can’t ignore,” says Anthony Tursich, senior portfolio manager of the Portfolio 21 Global Equity Fund, a so-called green fund that bought Apple in 2011 after the company began providing more emissions data.

Tursich’s biggest holding is another tech giant, Google GOOGLE INC.GOOG-0.97%, which he bought only after the search engine company made progress on renewable energy.

Environmental fund managers may be broadening their shopping lists in part because they have more money to deploy: For the 12 months ended April 30, investors put $1.9 billion of new money into the 72 funds tracked by Lipper that use environmental criteria in their investment decisions.

That’s still tiny relative to the $247.6 billion that went into all U.S. equity funds, but it represents a 5% inflow that Lipper research head Tom Roseen said was significant. The bulk of the new money, more than $1 billion, went into the dominant $9.5 billion Parnassus Core Equity Fund, Lipper said.

Apple is the top holding of the Parnassus fund, which bought most of the shares in 2013, the year the fund rose 34% and beat 72% of peers, according to Morningstar. Through June 13 the fund was up about 7% in 2014, beating 87% of peers.

Fund managers cited a mix of reasons for warming up to Apple, including reforms pushed by Chief Executive Tim Cook and the stock’s outlook. It is up 15% in 2014 on enthusiasm for its iPhones and other pending products, as well as a stock split and a dividend increase.

In the past, Apple had taken hits from activist groups like Greenpeace — which in 2010 called it “very weak” on climate and emissions matters — and has faced scrutiny over the hiring of children at factories of suppliers that make its products.

It also earned a bottom score of “4” on its carbon footprint from the Boston sustainability advocacy group Ceres. Ceres senior manager Kristen Lang said Apple had not released enough information to get a better score, such as making public its targets for reducing greenhouse gas emissions. Google received a higher score of “2” from Ceres, which praised its spending on renewable energy.

Among other things, Greenpeace said Apple was moving too slowly to stop using hazardous materials like polyvinyl chloride plastic — often used to insulate electrical cables — and brominated flame retardants in its products. Critics worried both materials could be released from products during use or when older computers or power cords are disposed in landfills.

In recent years, however, Apple has made changes and improved its image with environmentalists. In April, Greenpeace called Apple a leader for things like powering data centers with solar arrays, wind farms and water. Ceres’ Lang said Apple might get a higher score currently based on steps it has taken since data for her groups’ report was collected last fall.

In addition, Apple this year reported a sharp decline in number of underage workers hired at its supplier facilities abroad.

Apple — whose board includes environmentalist and former U.S. Vice President Al Gore — also last year hired former U.S. Environmental Protection Agency head Lisa Jackson to oversee areas like cutting toxins from its products.

Asked about the Ceres score, Apple spokesman Chris Gaither said the company powers 94% of its global corporate facilities with renewable energy now, up from 35% in 2010. He added: “Of course, the cleanest energy is the energy you never use, and that’s why we’ve made efficiency such an important feature in Apple facilities and products.”